Trading Psychology
Fear and Greed: The Two Emotions That Destroy Traders
Fear and greed are the two primary emotional drivers that cause retail traders to consistently underperform.
Key rules
- Fear causes premature exits from winning trades
- Greed causes overextension of targets and position sizes
- Pre-define all trade parameters before market opens
- Do not adjust a trade plan mid-trade due to price movement
- Review greed/fear patterns in your journal weekly
Fear manifests as cutting winners short, hesitating on valid setups, and micromanaging positions. Greed manifests as moving take-profits further away, adding to losing positions, and overtrading after big wins.
The antidote is pre-trade planning: define your entry, stop, and target before the market opens. If your plan is specific, emotion has less room to reinterpret price action in the moment.